Index of growth declines slightly at end of year but economy remains on track
to record fastest growth since 2007

Britain's dominant service sector continued its rapid expansion in December to complete a clean sweep year in which it grew every month,

The Markit/CIPS Purchasing Managers' Index (PMI) of services activity, in which any reading above 50 indicates growth, reached 58.8 last month. This was below expectations and the weakest rate of growth for six months.

However, the average growth rate in new orders in the final quarter of the year was the best in survey history, according to Markit, boding well for the new year.

Services account for almost 80pc of Britain's economic output, making the PMI reading a key indicator of economic strength. December's figure was down from the 60 seen in November and the 62.5 of the previous month, when it hit a 16-year high.

Despite growth slowing, Markit's chief economist Chris Williamson said the figure indicates the British economy grew at the fastest rate since 2007 last year.

"If the buoyancy of the surveys in the fourth quarter is borne out by the official data, the economy will have grown by 1.9pc over the course of 2013," he said. "“More strong growth looks likely as we move into 2014."

Mr Williamson said the data showed a "broad-based upturn", with IT, transport, finance and business-to-business services growing strongly and the weakest sectors being hotels, restaurants and personal services.

"While these household-facing sectors have nevertheless seen decent growth, their underperformance is another reminder that this is not purely a consumer and housing driven boom that we are currently seeing," he said.

Expectations for the sector, meanwhile, were at a three-and-a-half year high in December, with well over half of survey respondents predicting growth in the next year. Employment grew for the 12th successive month.

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December data for the construction and manufacturing sectors last week also showed expansion, although like services, the PMI readings declined on the previous month.

Despite lower readings in January, the UK economy continues to outstrip the eurozone, which registered a services PMI of 51, and a composite reading - which amalgamates services, manufacturing and construction - of 52.1. The UK's composite figure was 59.5.

Following the announcement, the pound fell slightly against the dollar, from $1.637 to $1.634.

Howard Archer, chief UK and European economist at IHS Global Insight, said that although disappointment at the lower services reading is inevitable, the rate of growth would have looked phenomenal a year ago.

"This is still a very strong report overall showing healthy expansion, robust incoming business, markedly rising employment and confidence in the sector at a near four-year high. In short, this is still a survey that would have been killed for at the beginning of 2013!" he said.

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